Beware of 60 day notification rule for PA USTIF Claims

Gasoline service stations rely on reimbursement from the PA Underground Storage Tank Indemnity Fund (USTIF) to pay for site investigation and remediation of petroleum contamination after a “release” is discovered. Costs to comply with DEP regulatory requirements often exceed $100,000 and occasionally go to $1 million or more. In areas where homeowners are not connected to public water, private law suits by well users may accompany DEP enforcement action.

In light of the above, USTIF remedial funding and defense of private suits is crucial, and denial of a claim for procedural deficiencies can be catastrophic, especially for privately owned service stations.

A common procedural issue in USTIF claims is the regulatory requirement to notify USTIF within 60 days of “confirmation” of a release. Claimants typically run afoul of this requirement by waiting to report until after initial sampling results confirm exactly where and how much of a release is occurring. This process often takes several months. However, USTIF typically takes the position that once a claimant discovers contamination, the 60 day period begins to run, and the claimant is not entitled to wait for a formal report containing more details.

The 60 day rule often arises when ownership of a service station changes hands. Many facilities have documentation of historic releases, discovered during tank upgrades or other construction work. The extent of soil remediation varies and may not be clear from available documents. Therefore, a new owner typically takes title with some knowledge of previous contamination—either disclosed by the Seller or documented during due diligence, or both. If the new owner subsequently performs sampling and discovers a problem that requires remediation, USTIF may very well invoke the 60 day rule unless you can prove that there is a new leak that is unrelated to what was “known” previously.

If USTIF denies a claim, an administrative appeal must be filed within 35 days of the date of the denial. The results of such an appeal will be unpredictable in light of the vagueness of the USTIF regulation and the limited reported case law regarding the 60 day rule. Nevertheless I have, on at least one occasion, obtained reversal of an initial claim denial, on the grounds that previous investigation results were inconsistent and that a release was not confirmed until post-acquisition follow up sampling was implemented.

In any event, purchasers of service stations are well advised to assure that the property is not coming with previously documented conditions that require remediation but may be disqualified from USTIF coverage because of the 60 day notification rule.